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REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION

I.A. NO. 247,    I.A. NO. 250 IN I.A. NO. 247 AND

I.A. NO. 252 IN I.A. NO. 247 IN

WRIT PETITION (C) NO. 562 OF 2009

SAMAJ PARIVARTANA SAMUDAYA & ORS.                             ...PETITIONER(S)

VERSUS STATE OF KARNATAKA & ORS.          ...RESPONDENT(S)

J U D G M E N T RANJAN GOGOI, J.  

1.  Two related and connected issues have arisen for  determination  in  the  present  interlocutory applications.  

2. The first is with regard to the objection of the mining lessees to continue to pay 10% of the sale proceeds of mining to the Monitoring Committee for  eventual  transfer  to  the  Special  Purpose Vehicle  (“SPV”  for  short)  that  has  since  been

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constituted  to  implement  the  Comprehensive Environment  Plan  for  the  Mining  Impact  Zone (“CEPMIZ” for short and hereinafter referred to as ‘the  scheme’)  in  the  Districts  of  Bellary, Chitradurga and Tumkur of the State of Karnataka. For the present, it will be sufficient to notice that this Court by its orders passed from time to time  had  directed  the  setting  up  of  a  Special Purpose  Vehicle  for  the  purpose  of  execution  of ameliorative and mitigative works/measures to deal with the large scale degradation of the environment that had occurred due to the unprecedented illegal mining that had taken place in the mining leases operating in the aforesaid three districts at the relevant point of time.  This Court had, from time to time, directed preparation of a scheme outlining all  the  details  of  the  works  required  to  be undertaken; the process of implementation of the same  by  implementing  agencies;  accounting procedures etc. and for submission of the same to this  Court  in  consultation  with  the  Central Empowered Committee (“CEC” for short). This Court

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was also of the view that the funds for the SPV to enable ameliorative and mitigative measures to be undertaken, as per the CEPMIZ to be prepared, would primarily come from (a) 10% of the sale proceeds of the minerals; (b) compensation for illegal mining etc.; and (c) other receivables by the Monitoring Committee to be directed to be transferred to the SPV from time to time.

3.  The various orders passed by this Court from time to time had received final approval of this Court  in  the  judgment  and  order  dated  18.4.2013 which finally terminated Writ Petition (C) No. 562 of 2009 titled “Samaj Parivartana Samudaya and Ors. vs. State of Karnataka and Ors.1  

4. Pursuant  to  the  aforesaid  order(s),  the Government of Karnataka has constituted a Special Purpose  Vehicle  known  as  Karnataka  Mining Environment  Restoration  Corporation  (“KMERC”  for short)  on  13.06.2014  with  the  Additional  Chief

1

[2013 (8) SCC 154]

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Secretary  to  the  Government  of  Karnataka  as  the Chairman.  The CEPMIZ i.e. the Scheme has since been  prepared  and  is  presently  awaiting  the approval of the Court which is the next/connected aspect of the matter, for the present.  

5. Insofar as the first question is concerned, the prayer made by the applicant, Federation of Indian Mining  Industry,  Southern  Region  (“FIMI-Southern Region”) and duly supported by another lessee M/s. Vedanta,  in  short,  is  that  after  the  Mines  and Minerals (Development and Regulation) Amendment Act 2015 had brought in Section 9B in the Act with effect from 12.1.2015 a District Mineral Foundation is required to be set up in every district affected by mining related operations. Under Section 9B(5) and (6) lessees are required to pay to the District Mineral  Foundation  (“DMF”  for  short)  an  amount equivalent  to  such  percentage  of  royalty  not exceeding  one-third  of  such  royalty,  as  may  be prescribed by the Central Government.

6. The Ministry of Mines, Government of India by a

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Notification dated 17.09.2015 has prescribed that in respect of leases granted prior to 12.01.2015 the amount payable to the DMF shall be 30% of the royalty i.e. 5.5% of the sale value (approx.) and in respect of leases granted after 12.01.2005 the contribution  to  the  DMF  shall  be  @  10%  of  the royalty i.e. 1.5% of the sale value. Consequently, the  leases  in  Category-A  and  Category-B  mines, presently, in addition to 10% of the sale value payable  to  the  Monitoring  Committee/SPV  are required to pay about 4.5% of such value to the District Mineral Foundation. It  is  contended  by FIMI-(Southern Region) that by Notification dated 11.01.2016 the District Mineral Foundation Rules, 2016  have  been  notified  by  the  Government  of Karnataka.  The  objects  of  the  District  Mineral Foundation as prescribed in Rule 3 is as follows:

“3. Objects of Foundation.- The objects of the District Mineral Foundation shall be to work for the interest and benefit of the persons and areas affected by mining related  operations  in  the  districts  in such manner as may be prescribed by the State Government:- (1) to implement various developmental and

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welfare  projects  or  programs  in  mining affected areas. (2) to  minimize  or  mitigate  the adverse impacts, during and after mining, on  the  environment,  health  and socio-economics  of  people  in  mining districts; and (3) to  ensure  long-term  sustainable livelihood  for  the  affected  people  in mining areas” “Rule  18  of  DMF,  2016  prescribes  the purpose for which the funds shall be used and which include drinking water supply, education, welfare of women and children, aged  and  disabled  persons,  skill development,  sanitation,  physical infrastructure, irrigation and energy and watershed development.”

7. In the light of the aforesaid developments it is contended by the applicant in I.A. No. 247 that the object behind the ameliorative and mitigative measures, in terms of the CEPMIZ prepared under the Court’s orders issued, from time to time, is one and the same as the object behind the creation of the District Mineral Foundation. Accordingly, the applicant-FIMI  (Southern  Region)  has  prayed  for clarification of the earlier orders of this Court to the effect that the iron ore lessees in the

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State of Karnataka will no longer be required to contribute  10%  of  the  sale  proceeds  to  the Monitoring Committee or the SPV from the date of which  said  lessees  have  become  liable  to  make payment to the District Mineral Foundation under Section 9B of the Mines and Minerals (Development and Regulation) Act 2015, as amended.

8. In response, the Union of India and the State of  Karnataka  have  opposed  the  grant  of  any relief/clarification,  as  prayed  for  by  the FIMI-Southern  Region.  According  to  the  Union  of India, the SPV contemplated under the orders of the Court,  for  the  purpose  of  taking  various ameliorative and mitigative measures in the three Districts, which has since been established, is a sequel  to  the  large  scale  plundering  of  the environment and consequential socio-economic damage caused to this region by illegal mining that had taken place on an unprecedented scale. The Union of India  has  stated  that  taking  note  of  the extraordinary depredation of nature and environment

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that had occurred in the three mining districts of Karnataka,  the  SPV  has  been  constituted  by  the Court  to  respond  and  to  repair,  reconstruct  and restore  nature  and  environment  in  its  pristine form, as far as practicable.  It was to answer a situation which was extraordinary and specifically confined to the mining regions of the districts of Bellary, Chitradurga and Tumkur that the SPV has been constituted. In Paragraph 10 of the affidavit filed on 5.9.2016 by the Union of India, it has been stated as follows:

“It is submitted that the District Mineral Foundation  (DMF)  as  contemplated  by Section 9B of the MMDR Act, 1957 is a body that has been envisaged for the benefit of mining affected areas and populations in a situation where mining is carried out in a responsible manner, within the limits, and subject  to  the  conditions,  laid  down  by various approvals and clearances such as the forest clearances and the environment clearances.  The  DMF  mechanism  is applicable on a uniform basis across the country. It is not a mechanism designed to deal with any area specific extraordinary situation  arising  out  of  large  scale, irresponsible and reckless mining carried out  with  total  disregard  to  the consequences on the environment as was the case in Karnataka.”

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9. Specifically, in paragraph 15 of the affidavit, the Union of India has stated that:

“Considering  all  the  above,  it  is  clear that the DMF was never intended to be, and can never actually work as, a substitute for the CEPMIZ.”

10. The  State  of  Karnataka  has  also  filed  its detailed objections to the grant of any relief, as sought for by FIMI-Southern Region. In addition to the  stand  taken  by  the  Union  of  India  in  its affidavit, as noted above, the State of Karnataka has  pointed  out  that  the  CEPMIZ  prepared  and submitted to the Court in consultation with the CEC proceeds  on  the  recommendations  of  the  CEC  that henceforth  the  lessee  should  be  directed  to  pay 5.5%  of  the  sale  proceeds  to  the  Monitoring Committee/SPV  (details  in  this  regard  would  be noticed  subsequently).  The  whole  CEPMIZ  Scheme, particularly,  the  financial  projections  for successful implementation thereof has been drawn up on that basis. Grant of the prayer made by the FIMI-Southern Region would result in upsetting the entire scheme as a whole and would jeopardize its

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contemplated/planned  implementation.  Furthermore, according to the State of Karnataka, any order of discontinuance  of  the  contribution  to  the Monitoring Committee/SPV by the lessees of A and B categories would seriously prejudice other lessees who have obtained leases recently and who would be obtaining  such  leases  in  future,  inasmuch  as,  a percentage of the sale proceeds for such leases is to be contributed by the State of Karnataka and made available to the SPV. The State contends that such  a  situation  would  result  in  a  highly inequitable  position  inasmuch  as  the  existing lessees  responsible,  in  a  way,  for  the environmental degradation would not be contributing anything  further  to  the  SPV  in  undertaking ameliorative and mitigative steps to restore the environment  whereas  new  leases  e.g.  category  C lessees, who may not be so responsible, would be so contributing.

11. The  CEC  in  its  response  dated  27.04.2016, however, has taken a slightly different view of the

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matter. In the comprehension of the CEC there is a fair amount of overlapping between the objects of the District Mineral Foundation and the purpose for which the Court had passed orders for creation of the SPV with the task outlined, as noticed above. According to the CEC, for existing leases, 30% of the royalty paid presently works out roughly about 4.5% of the sale proceeds. Accordingly, the CEC has suggested that  the existing lessees may pay 5.5% of  the  sale  proceeds  to  the  Monitoring Committee/SPV (instead of 10%) and at the same time continue to discharge the statutory liability of payment to the District Mineral Foundation to the extent of 30% of the royalty, equivalent to about 4.5% of the sale proceeds.

12. We  have  considered  the  matter.  We  have  also taken note of the previous orders of this Court particularly  the  final  order  dated  18.04.2013 (Paragraph 37); the objects behind the amendment of the Mines and Minerals (Development and Regulation) Act by inclusion of the provisions of Section 9B;

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and also the notifications issued from time to time including  the  objects  of  the  District  Mineral Foundation  as  provided  for  by  Rule  3  of  the District  Mineral  Rules,  2016  notified  by  the Government of Karnataka on 11.01.2016. Though, at first  blush,  it  may  appear  that  there  is  some amount of overlapping between the objects of the District  Mineral  Foundation  and  the  purpose contemplated by the Court’s order in setting up the SPV, the observations of this Court in Paragraph 37 of the judgment dated 18.04.2013 (supra) would make the position amply clear. The statutory enactments and exercises carried out subsequent to the Court’s order(s)  will  have  to  be  understood  to  be  the expression  of  the  legislative  opinion  of  the necessity  to  meet  the  challenges  of  mineral exploitation  that  are  incidental  to  any  mining operation. Every mining activity results in baneful effects which need to be corrected and destruction of  environment  that  inevitably  occurs  in  the process needs to be mitigated. This is the specific reiteration that has been made by the amendment of

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the  provisions  of  the  Act  and  the  Rules  framed thereunder.  What  had  happened  in  Bellary, Chitradurga and Tumkur, has already been noticed by this Court in Paragraph 37 of the judgment dated 18.04.2013  i.e.  systematic,  extraordinary  and unprecedented  plunder  of  the  natural  wealth  and environment. This Court has specifically observed in  paragraph  37  that  “the  situation  being extraordinary  the  remedy,  indeed,  must  also  be extraordinary”.  It  is  to  deal  with  such  an extraordinary  situation  that  the  necessity  of CEPMIZ  and  implementation  thereof  by  a  Special Purpose Vehicle out of funds in credit with the Monitoring Committee was contemplated. The special funds  in  deposit  with  the  Monitoring  Committee being the proceeds of illegal mining were meant to be deployed for recreation of what have been lost due  to  such  illegal  activities.  It  is  for  the aforesaid purpose that CEPMIZ was required to be drawn up and thereafter implemented. The state of implementation of the Scheme has not yet commenced. Funds  in  huge  proportions  would  be  necessary.  A

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full and clear picture is yet to emerge.  In a situation  lessees  who  may  be  even  remotely connected with the degradation and destruction of nature  must  continue  to  pay  their  share  in  the process  of  restitution  by  contributing  to  the Managing  Committee  from  their  present  sale proceeds. Even the new lessees who may not have been  involved  with  such  degradation  are contributing  to  the  process  of  reclamation  and restoration. In such a situation, we do not see how we  can  vary  or  modify  our  earlier  orders  that require all existing lessees to pay 10% of the sale proceeds and/or to depart from the requirement of payment of what has been already ordered, namely, 10%  of  the  sale  proceeds  to  the  Monitoring Committee/SPV.

13. In  view  of  the  aforegoing,  Interlocutory Application No. 247 and the connected Interlocutory applications are dismissed.

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14. The second issue that has to be dealt with is with  regard  to  grant  of  approval  to  the  CEPMIZ which has been prepared by the State Government in consultation with the CEC in terms of the various orders passed by this Court from time to time. The aforesaid Scheme, if approved, is to be implemented through the Special Purpose Vehicle i.e. Karnataka Mining Environment Restoration Corporation (“KMERC” for short) which has since been constituted.

15. We  have  perused  the  CEPMIZ  which  has  been presented  before  us  by  the  CEC  by  report  dated 29.04.2016.   Very  broadly  speaking,  the  works proposed under the Scheme can be divided into two broad categories, one pertaining to socio-economic development and the other for integrated mining and railway  infrastructure,  industrial  infrastructure and  medical  infrastructure.  The  Chart  extracted below would indicate what is comprehended in the Scheme, the total cost projected and the source of funds.

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EXPENDITURE INCURRED IN REFERENCE TO THE IMPLEMENTATION OF THE CEPMIZ SCHEME (OVER A PERIOD OF TEN YEARS)

SER IAL

CATEGORY OF EXPENDITURE AMOUNT INCURRED

(in crore rupees)

   LOGISTICS FACT ON RECORD

1 I. Public Health 410.94 The  entire  sum  of  7,142 crore  rupees  is  borne  by the  Special  Purpose Vehicle. The sum is spread across  ten  years  and  the SPV submits that this sum is  sufficient  to  implement the  utility  infrastructure requirements  of  the CEPMIZ.

The  amount  represented across  the  individual category  of  utility infrastructure  is  further divided by the SPV across the  three  districts  of Bellary,  Tumkur  and Chitradurga  after appropriately  ascertaining the  requirements  on ground.  

II. Education 442.27 III. Water Supply and Quality 1,320.91 IV. Transport and Communication 2,252.66 V. Agriculture and allied activities 573.14 VI. Drainage and Sanitation 375 VII. Woman and Child Welfare 403.59 VIII. Forest, Ecology and Environment 809.05 IX. Strengthening the Forest Check-Posts 70.97

X. Skill Development 336.23 XI. Tourism 147.59

SUB-TOTAL 7,142.35 2 I. Conveyor Belt System and Railway Sidings 2,900 This amount is completely

borne  by  the  lessees holding  mining-ore licenses.

The SPV submits that it is advantageous  and economical for the lessees to  move  the  iron-ore through the conveyor belt system.  The  SPV  thus seeks  a  contribution  of 2,900  crore  rupees  from the  lessees  as  their  share on  part  of  mutual consideration.

II. Railway Sidings 500 This amount is completely borne by the SPV.

The SPV is contributing a sum of 1,500 crore rupees as their share towards the development  of  Mining and  Rail  Infrastructure within  the  CEPMIZ Scheme.

III. Railway Sub-Lines 1,000

IV.  Tumkur-Chitradurga-Davanagere  Railway Line

2,500 The  Indian  Railways  is investing  a  sum  of  1,000 crore  rupees  within  this project  and  the  SPV  is contributing  a  sum  of 1,500 crore rupees.

The  Indian  Railways  is executing  this  project independently  in  order  to strengthen  the Bengaluru-Mumbai Economic  Corridor.  The SPV is contributing a sum of  1,500  crore  rupees within  this  project,  since the completion of the same would  greatly  benefit  the effective  implementation of the CEPMIZ Scheme.

SUB-TOTAL 6,900

3 Industrial Infrastructure 750 This amount is completely borne by the SPV.

An  industrial  project, costing to the tune of 1537 crore  rupees,  is  already underway  across  the Bellary-Tumkur-Chitradur ga  area.  This  project  is executed by the Karnataka Industrial  Area Development  Board (‘KIADB’).  Since  this project  is  situated  within the  mining-affected  area,

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the SPV is  contributing a sum of 750 crore rupees as their  share  of  the consideration.

4 Medical Infrastructure 950 This amount is completely borne by the SPV.

The  SPV  is  investing  a collective  sum  of  700 crore  rupees  to  open  two new  medical  colleges within  the  districts  of Tumkur  and  Chitradurga. The  SPV  also  intends  to upgrade  the  Vijaynagar Institute  of  Medical Sciences at Bellary. A sum of  250  crore  rupees  has been  earmarked  for  the maintenance  of  medical infrastructure.

5 GRAND TOTAL 15,742.35 The Cost of implementing the Comprehensive Environmental Plan for the Mining Impact Zone.

16. Out  of  the  Rs.  15,742.35  crores  which  is envisaged as the total cost of implementation of the CEPMIZ over a period of 10 years, the funds presently available and that would be forthcoming in the future so far as the SPV is concerned, as indicated in the report of the CEC, is as follow.

SERIAL SOURCE AMOUNT  (in crore rupees)

1 Funds  transferred  from  the  Monitoring Committee; amounting from 10% to 20% of the annual  sale  proceeds  of  the  iron-ore facilitated through the e-Auction Committee of the CEC

7,000

2 Funds received from yearly receipt of 5.5% of total  iron-ore  sale  effected  by  mining-ore lessees holding  license in  Category ‘A’  and ‘B’,  after  the  commencement  of  mining operation (payments spanning across a period of ten years)

1,624

3 Funds received  from the  State Government  of Karnataka,  at  a  premium  rate  of  25%  of sale-value,  effected  after  the renewal/sale/auction  of  mining-ore  licenses within Category ‘A’, ‘B’ and ‘C’

1,712

TOTAL 10,336

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17. The above would indicate that while a total of Rs. 11,842 Crores is the cost that is proposed to be incurred  by  the  SPV,  keeping  in  view  the  amount available,  as  mentioned  above,  i.e.  Rs.  10,336 Crores, there is a shortfall of Rs. 1,560 Crores. The same is contemplated to be made up by cost savings and reduction in project cost; interest accruing on different amounts from time to time and on a possible expectation  of  an  over-estimate  of  the  costs calculated under different heads.

18. The  CEC  in  its  report  and  the  learned  Amicus Curiae in his written note submitted jointly with the CEC has suggested that the scheme may be approved in the following terms:

“(i)  the  CEPMIZ  prepared  by  the  State  of Karnataka may be approved for implementation through the KMERC. The KMERC may be granted liberty  to  approach  this  Hon’ble  Court seeking addition/ modification of any of the Schemes/ Projects envisaged in the CEPMIZ; (ii) Monitoring  Committee  may  be permitted to transfer Rs. 7,000 Crores upto 31.03.2017 out of the funds lying with it including the interest received by it; (iii) “The  Implementation  and  Monitoring and  Supervision  Framework  for  the  CEPMIZ” (Annexure A-3 at Page 101 of CEC Report dated 29.04.2016) may be made binding on the KMERC

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and the State Government; (iv) the  accounts  of  the  KMERC  will  be annually audited by the CAG; (v) a  ceiling  of  5%  of  the  annual expenditure on works on the administrative expenses of KMERC may be prescribed; (vi) the  commitment  made  by  the  State Government  that  25%  of  the  annual  premium amount  receivable  from  all  the  auctioned leases (new leases/ Dalmia lease/ Category-A/ Category-B  leases)  may  be  recorded  in  the order; (vii) it  may  be  clarified  that  the ‘Guidelines for Preparation of R&R Plans’ as approved by this Hon’ble Court are equally applicable  to  all  the  new  leases  granted through auction/ under Section 10A(2)(a) and 10A(2)(c) of the MMDR Act; (viii) Hon’ble  Court  may  consider clarifying  that  any  amount  required  for construction  of  railway  sidings  and/  or alternate road in Districts Chitradurga will be incurred by the KMERC only on the capital cost recovery basis; (ix) regular  quarterly  progress  report regarding the implementation of the CEPMIZ will be filed before this Hon’ble Court by the Chairman, KMERC; (x) the  closed  pipe  downhill  conveyer systems will be installed at their cost by: (a) each  one  of  the  Category-A/Category-B

leases with MPAP of 1 MMT and above and balance  lease  period  of  8  years  and above  (six  leases  in  District  Bellary and  one  in  District  Chitradurga identified);

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(b) each  one  of  the  auctioned  Category-C leases  and  Dalmia  Lease  (ML  No.  2010) with  MPAP  of  0.75  MMT  and  above  (ten leases provisionally identified);

(c) all  nine  new  leases  proposed  to  be auctioned, Category-A/ Category-B leases that  may  be  auctioned  after  expiry  of their lease periods and leases that may be granted under Section 10A(2)(c) and 10A (2)(a) of the MMDR Act (presently 10 leases identified); and

(d) JSW  Steel  Ltd.,  the  largest  buyer  of iron ore (buyer of about 70% of the iron ore produced in these Districts) between Nandllhalli to its plant at Turanagallu and  linked  conveyer  system  with  a capacity for annual transportation of at least 15 MMT or iron ore. The  respective  lessees/  successful bidders  of  auctioned  lease  will  be required  to  finalise  the  alignment within a maximum period of three months. The area for the Right of Way (ROW) and/ or  the  approvals  under  the  Forest (Conservation)  Act,  will  be  acquired/ obtained by the State Government at the cost  of  the  respective  lessees/  Steel Plant.  Such  acquisition  of  ROW/ approvals  under  the  Forest (Conservation) Act will not be treated as mining or related activities but for the purpose of the implementation of the CEPMIZ.  The  State  Government  and  the MoEFCC  will  expedite  the  necessary clearances/ approvals. The  lessees/  Steel  Plant  will  be required to install the conveyer system within  a  maximum  period  of  18  months after  the  area  under  the  ROW  is  made available  failing  which  the  mining

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operations  in  the  concerned  lease(s) will  be  suspended  and  permitted  to recommence  only  after  the  conveyer system is installed.

(xi) the  identified  lessees  dealt  with above will also be required to individually/ collectively  construct  or  up-grade  railway sidings  so  that  the  bulk  of  the  mineral produced in such mining leases is transported through  closed  pipe  conveyer  systems/ railways and not by road. Wherever, due to technical reasons/ practical difficulties the individual lessees are not in a position to undertake  construction/  up-gradation  of railway  sidings,  KMERC  may  undertake  such construction on capital cost recovery basis; (xii) total  production  of  30  MMT  from operating  Category-A/Category-B  leases  and those  granted  under  Section  10A(2)(a)  and 10A(2)(c) of the MMDR Act will be permissible i.e., the present cap will not apply to the auctioned leases.

Under  the  directions  of  this  Hon’ble Court NMDC Ltd. has been permitted to produce 12 MMT annually from its two mining leases. The MPAP as per the approved R&R Plans for its ML No. 1111 is 6.07 MMT and for ML No. 2396  is  3.38  MMT  i.e.  presently  permitted production,  under  the  directions  of  this Hon’ble  Court,  is  2.55  MMT  more  than  the total of MPAP permissible in the approved R&R Plans.  In  addition,  the  MML  has  been permitted  under  the  directions  of  this Hon’ble Court to produce 3 MMT or iron ore beyond the MPAP as per the approved R & R Plans of its two mining leases. As and when the  sum  total  of  production  from  the operating Category-A/ Category-B leases and Section  10A(2)(a)  and  10A(2)(c)  leases  is likely  to  exceed  30MMT  the  production  of additional 2.55 MMT from two Mines of NMDC Ltd. and additional 3 MMT from the two Mines

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of MML will be permissible to be reduced on pro-rata basis and to such an extent that the total production from all the Mining Leases does not exceed the cap;

(xiii) additional production of 10MMT will be permissible from the auctioned Category-C and  auctioned  Dalmia  mining  leases  and subject  to  the  compliance  of  the prescriptions of the R & R Plans, lease wise permissible  MPAP  and  condition  regarding installation  of  conveyer  belt  systems  and railway sidings dealt with earlier. (xiv) this Hon’ble Court may consider any further enhancement of production only after the proposed construction of conveyer belt systems for downhill transportation, conveyer belt  system  by  JSW  Steel  Ltd.  and  the construction/ up-gradation of railway sidings are completed and the objective of ensuring transportation  of  most  of  the  mineral  by railways/ conveyer system is achieved i.e. a situation is reached on the ground where even if any further enhancement of production is permitted,  the  present  level  of transportation of mineral by road would not exceed.”

19. The various suggestions made by the CEC and the learned Amicus Curiae and the conditions subject to which the approval of the Scheme has been sought can be  better  understood  by  taking  into  account  the objections  to  the  CEPMIZ  as  raised  by  the FIMI-Southern Zone in its written objections filed and also the report of the State of Karnataka insofar

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as the Scheme presented to the Court is concerned.

20. Briefly  and  broadly,  the  objections  of  the FIMI-Southern  Region  relate  to  the  very  broad, sketchy and vague nature of the Scheme formulated and presented to the Court, which, according to the said body, is a superficial exercise prepared after a long period  of  slumber.  According  to  the  FIMI-Southern Region,  the  preparation  of  the  Scheme  should  have been started in the right earnest way back in the year  2012  after  the  Court  in  its  Order  dated 28.9.2012 had expressed that, ”the formation of the Special Purpose Vehicle and the drawing up of the Comprehensive  Environmental  Plan  for  Mining  Impact Zone  is  perhaps  the  most  essential  part  in  the process of reclamation and rehabilitation of the area devastated  by  illegal  mining”.  The  FIMI-Southern Region  also  contends  that  some  of  the  measures included in the CEPMIZ travel beyond the contours of this  Court’s  order  constituting  the  SPV  and  the purpose  behind  it.  The  outlay  of  funds,  it  is contended,  goes  beyond  the  scope  of  the  earlier orders of this Court which clearly contemplate that

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no part of the special fund would stand transferred to the Consolidated Fund of India but would be used exclusively  for  purposes  connected  with  the  SPV. Several  socio-economic  projects  like  tourism  and infrastructural  measures;  laying  of  railway  lines; setting up of industrial and medical infrastructure involve deployment of SPV funds for purposes which are to be executed in the course of normal/ordinary governmental functions. Expenses in connection with such activities are required to be met out of the Consolidated Fund and not from the special fund. The FIMI-Southern Region has also disputed the extent of availability of funds that the Monitoring Committee has indicated in the CEPMIZ prepared by the State Government in consultation with the CEC. According to the FIMI-Southern Region, the total funds available with the Monitoring Committee as on 31.03.2016 is Rs. 8,124 Crores and not Rs. 7,000 Crores, as claimed. As there is a surplus of about Rs. 1,800 Crores (as on 31.03.2016)  over  and  above  what  is  shown  in  the CEPMIZ, the core projects of the scheme envisaged, namely,  construction  of  conveyor  belt  system  and railway lines and railway sidings can be met from the

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available  funds  instead  of  again  burdening  the lessees to the tune of Rs. 2,900 Crores. It further contends  that  from  final  report  of  the  CEC  dated 3.02.2012, investment in facility of transportation of iron ore such as conveyor belt, railway sidings was to  be met  from SPV  funds. In  its objections, FIMI-Southern Region has further contended that the Tumkur,  Chitradurga,  Davanagere  railway  line  is  a normal venture undertaken by the Indian Railways and it is not understood how the same can be beneficial to  the  restoration  of  environment  in  the  three districts devastated by large scale illegal mining. Though,  a  sum  of  Rs.  500  Crores  to  be  spent  on railway sidings was initially to be borne by SPV, in the joint report of the CEC and the learned Amicus Curiae it is mentioned that DPR for construction of the railway sidings will be on capital cost recovery basis. Similarly, the investment of Rs. 750 Crores in industrial  infrastructure,  namely,  in  projects undertaken by Karnataka Industrial Area Development Board and such other bodies is beyond the scope of the ameliorative and mitigative measures for which incurring  of  expenditure  and  investment  from  the

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special  fund  was  permitted  by  the  Court.  Projects undertaken by the KIADB and other such bodies pertain to  the  normal  activities  of  such  State  bodies. Besides objecting to further continuance of any levy on the sale proceeds of iron ore (either by existing lessees or future lessees) after the establishment of the District Mineral Foundation, FIMI-Southern Region also contends that the funds that would be available with the District Mineral Foundation for the next 10 years have not been taken into account in preparing the financial estimates mentioned in the CEPMIZ.

21. The State of Karnataka being virtually the author of the CEPMIZ had submitted to the Court that the same should have the Government’s approval subject to certain conditions.  Of particular significance are the suggestions of the State of Karnataka for raising the cap on production from 30 MMT to 40 MMT and, thereafter, to 50 MMT with a margin of additional 20% and the insistence on payment for the conveyor belt system and railway sidings by the lessees themselves. There are certain other incidental features/ aspects covered by the suggestions of the State of Karnataka

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which pertain to the rate of contribution out of the sale proceeds so far as the NMDC mines are concerned as well as the mines that would eventually be leased out under Section 10A(2)(b) and (c) of the MMDR Act.

22. We have considered the matter in depth. Beyond recording the view that the CEPMIZ, at this stage, is really in the nature of a vision document with all concrete  measures,  steps  and  proposals  left  to  be worked  out  at  a  later  stage  i.e.  the  stage  of preparation of the detailed project reports, we would not like to comment on the merits of the Scheme save and except to say that so far as the socio-economic measures  are  concerned,  very  broadly  and  roughly speaking, the different heads under which restoration and reclamation work is proposed to be done, subject to final details being worked out later, appears to be  sufficiently  comprehensive.  Insofar  as  the integrated  mining  and  railway  infrastructure, industrial and medical infrastructure is concerned, we are of the view that except for the integrated mining  infrastructure  and  part  of  the  railway infrastructure so far as railway sidings and railway

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sub-lines mentioned in the Chart shown hereinabove, the rest of the infrastructural measures can wait for the present. Having considered the various dimensions of the matter, we are of the view that instead of approving the CEPMIZ as a whole on the basis of the inputs available at this stage, we should hold back our  views  in  the  matter  until  more  comprehensive details are available in respect of each of the broad heads  under  which  ameliorative  and  mitigative measures are proposed to be undertaken. However, at the same time, we must convey our approval to the integrated  mining  and  part  of  the  railway infrastructure that is proposed, namely, construction of  the  conveyor  belt  system;  railway  sidings  and railway  sub-lines.  It  is  only  once  a  decision  is taken  on  raising  the  aforesaid  infrastructure  and noticeable headway in the matter of execution thereof is  reached,  that  the  other  ameliorative  and mitigative  socio-economic  measures  can  have  any relevance.  This  is  because  it  is  the  limited infrastructure that have been indicated above i.e. conveyor belt, railway sidings and railway sub-lines which  would  constitute  the  most  significant  steps

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towards controlling the environmental pollution that persists on account of open movement of iron ore by road.   It  is  only  after  controlled  and  regulated movement  of  iron  ore  is  achieved  that  the  other socio-economic measures should be undertaken so as to produce meaningful results. So far as the industrial infrastructure  is  concerned,  all  measures  already being  undertaken  by  the  KIADB  in  the  Bellery, Chitradurga, Tumkur areas may continue. It will not be necessary to involve the SPV in such activities at this stage. Transfer of funds from the SPV for such projects already undertaken by the KIADB and other bodies can always be considered at a later stage. The medical infrastructure on which an outlay of Rs. 950 Crores is contemplated need not engage the attention of this Court for the present. In other words, the entire  CEPMIZ Scheme need not be approved in one go and such approval may be considered and accorded in phases.  The  initial  activity  identified,  namely, construction of conveyor belt system; railway sidings and railway sub-lines needs to be prioritized.

23. Insofar as the transfer of funds is concerned,

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even  without  going  into  the  issue  of  the  exact quantum  of  funds  available  with  the  Monitoring Committee  for  transfer  to  the  SPV,  it  would  be suffice  to  say  that  the  funds  available  with  the Monitoring Committee as on date is more than adequate to meet the cost projected against the works which have been identified by the Court to be the priority works  for  the  repair  and  restoration  of  the environment. Once further details with regard to the aforesaid  three  items  of  work  are  available indicating what exactly that is proposed to be done; the period of time that is likely to be taken if the work is to be carried out independently of the other measures  included  in  the  CEPMIZ,  the  issue  with regard to the source of funds, namely, whether the sum  should  be  exclusively  from  the  funds  to  be transferred to the SPV or such cost is to be borne by the lessees can be decided by the Court.  

24. Accordingly, for the present, we close the matter by reserving our views with regard to phasing out of the scheme in different parts; the precise point of time at which the works in each of such phases can

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and should be made operative; the sources of funds to be deployed for each of such phases and such other connected  issues.  All  that  we  deem  fit  for  the present is to call upon State of Karnataka and the CEC  to  submit  a  detailed  proposal  with  regard  to implementation  of  the  Scheme  of  construction  of conveyor belt system in respect of existing leases and  the  details  of  the  project  relating  to  the construction  of  railway  sidings  and  railway sub-lines.  No  sooner  the  said  proposal/report  is filed before this Court, further orders will follow.

....................,J.               (RANJAN GOGOI)

....................,J. (PRAFULLA C. PANT)

....................,J.     (A.M. KHANWILKAR)

NEW DELHI MARCH 21, 2017